Oil prices declined early in the Oct. 18 session until encouraging US economic data released later in the day reduced losses to minimal levels in “largely uneventful” trading.
Marc Ground at Standard New York Securities Inc., the Standard Bank Group, said, “Oil markets preoccupied with high US inventory levels and demand destruction were encouraged by indications of a firming US economy” from the latest Philadelphia Federal Reserve Bank report and other data.
As a result, the front-month US benchmark crude contract recovered most of its earlier losses, ending the day essentially flat. However, North Sea Brent’s recovery was “more muted,” Ground said.
“The absence of any attention-grabbing headlines out of the Middle East this week (in particular, Iran and Syria) has weakened the geopolitical risk premium that Brent is pricing in,” he said. “This is notable in the narrowing of the West Texas Intermediate-Brent spread.” After reaching a record $23.95/bbl Oct. 15, the premium narrowed to $20.32/bbl Oct. 19 with the price of Brent dropping $3.63/bbl over three sessions while WTI gained a modest 25¢/bbl.
Ground said, “An easing of concerns over the Turkish-Syrian conflict and the potential for increased US crude demand could see a further narrowing of the WTI-Brent spread over the near term. However, we do feel that Middle East tensions remain significant enough to keep the spread from closing too dramatically. Barring any major positive developments in Syria or Iran, we don’t feel the premium could move sustainably below the $15/bbl low of this year over the next quarter.”
In other news, TransCanada Corp. shut down its 2,100-mile Keystone XL Pipeline Oct. 17 to check possible safety issues. After finding no leaks in the pipeline transporting Canadian crude into the US, the company plans to restart it Oct. 20. That news undercut crude prices in early trading Oct. 19.
The November contract for benchmark US light, sweet crudes slipped 2¢ to $92.10/bbl Oct. 18 on the New York Mercantile Exchange. The December contract dipped 6¢ to $92.53/bbl. On the US spot market, WTI at Cushing, Okla., was down 2¢ to $92.10/bbl.
Heating oil for November delivery declined 0.28¢ but closed essentially unchanged at a rounded $3.19/gal on NYMEX. Reformulated stock for oxygenate blending for the same month dropped 3.66¢ to $2.75/gal.
The November natural gas contract jumped 11.7¢ to $3.59/MMbtu on NYMEX with colder weather forecast calling for the Northeast. On the US spot market, gas at Henry Hub, La., gained 2.7¢ to $3.30/MMbtu.
In London, the December IPE contract for North Sea Brent fell 80¢ to $112.42/bbl. Gas oil for November was down 25¢ to $996.50/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes retreated 47¢ to$109.77/bbl.
Contact Sam Fletcher at firstname.lastname@example.org